Bond yields are rising. Stock markets are exuberant. The U.S. dollar is soaring. The generally accepted reasoning is simple: With the U.S. election victory of Donald Trump, markets are expecting higher growth and higher inflation in the world’s largest economy.

Inflation, when it’s tied to economic growth, can be a good thing. And for years since the Great Recession, inflation globally has been desultory — even in the U.S., which has been growing more robustly than other developed economies. As well, Trump has been clear that stronger economic growth ranks high among his ambitions. His campaign has officially estimated 3.5 per cent GDP growth under his policies; less officially, Trump himself has said four or even five per cent is doable.

So the inflationary boost of Trumponomics, assuming it happens, will be fine, right?

Well, the answer to that depends on what kind of inflation we’re talking about. Will it be the good kind that comes from sustainable economic growth? Or will it be more of a sugar rush that comes from government spending and short-term fiscal stimulus? Or, worst-case, will it be the really bad kind, where prices increase but growth stagnates or even declines?

Obviously, it’s hard to project because the actual outlay of Trump’s economic policies is still very much up in the air. We can really only go by his campaign promises, such as they are, and so far there is little indication he plans to veer far from his script.

Part of that script is a pledge to revitalize infrastructure, something that even Democrats have agreed is sorely needed. His plan involves throwing a trillion dollars at building stuff over the next decade. That seems like a lot of money.

But is it? As a share of the overall U.S. economy, it’s kind of a “meh.” Let’s say the trillion is spent evenly over 10 years, which amounts to US$100 billion annually. America’s nominal GDP at the end of the third quarter was just under US$18.7 trillion. So the projected direct spend on infrastructure would boost GDP by only about half a per cent.

Even that spend, however, is assuming a lot. According to an October paper by Trump advisers Wilbur Ross and Peter Navarro, the trillion in infrastructure would come largely from the private sector, incentivized by a tax credit. Now, no doubt there’s a lot of room for private equity in infrastructure, but the public-private partnership model isn’t really feasible for every project. Private investors might be all over infrastructure with clear future revenue streams — like toll roads — but they might be skeptical about the likely returns from “fixing our inner cities,” something Trump cited as a goal in his victory speech.

If private investors don’t step up, the federal government could just borrow the money. That will add to inflationary pressure, incentivizing the central bank to raise rates, while not producing very much incremental growth.

With the U.S. nearing or at full employment now, inflationary pressures are already there. But they will be aggravated by Trump’s plan to cut personal and corporate taxes. By independent estimates, those cuts will amount to more than $6 trillion over the next decade. Given that Trump has no clear plans to cut net expenditures, the U.S. budget deficit will soar.

Christopher Dilts/Bloomberg

Supply-siders will argue that the tax cuts will spur economic growth enough to cover the deficits, but history suggests otherwise. When Ronald Reagan became president in 1980 pledging trickle-down benefits, the deficit was 2.5 per cent of GDP; by the time he left, it was five per cent. Notably, Reagan presided over a recession from mid-1981 to late 1982. For the early part of that recession, inflation ran in the double digits.

Of course, that was a different time. But Trump’s economic vision includes other elements that may well result in both higher inflation and lower growth.

One of them is his anti-immigration stance, which would kick people out of jobs that domestic workers don’t want.

Another is his protectionist bent, which includes punitive tariffs on imports from Mexico, China and potentially Canada, among others. Trump claims these measures protect jobs. But even if we accept that (I don’t), somebody has to pay for them. Generally, consumers foot the bill, in the form of higher prices. Again, history: In 1980, successively more restrictive tariffs and quotas on carbon steel cost consumers more than $85,000 for every job saved. That’s nearly $250,000 in today’s dollars.

Let’s not forget that consumers comprise two-thirds of the U.S. economy. They are the least likely to benefit from Trump’s tax cuts, although the wealthy will do very well. They are already at or near full employment, suggesting there aren’t many more jobs to be gained from stimulus. If rates rise, and inflation ramps up, everything will be more expensive for them. Wages may go up, but probably not fast enough to keep up with inflation, nor modestly enough to leave corporate profits unscathed. That will hinder, not help, growth.

Of course, it’s possible Trump’s economic “plan” will result in higher growth and acceptably higher inflation. Maybe the U.S. can avoid rampant consumer price increases and higher deficits. Maybe a recession isn’t around the corner. We’ll see.

But in the meantime, let’s not pretend that the lessons of history can’t apply in the brave new world of President Trump.